Question: Listed below are several users of accounting

> Which transaction would require adjustment at December 31? a. The sale of merchandise for cash on December 30. b. Common stock was issued on November 30. c. Salaries were paid to employees on December 31 for work performed in December. d. A 1-year insura

> In December 2019, Swanstrom Inc. receives a cash payment of $3,500 for services performed in December 2019 and a cash payment of $4,500 for services to be performed in January 2020. Swanstrom also receives the December utility bill for $600 but does not

> Which of the following statements is true? a. Under cash-basis accounting, revenues are recorded when a company satisfies its performance obligations and expenses are recorded when incurred. b. Accrual-basis accounting records both cash and noncash trans

> How does accrual-basis net income differ from cash-basis net income?

> Describe the structure of the worksheet and the accounting information it contains.

> Below are items that may appear on the balance sheet. Item Classification 1. Buildings a. Current assets 2. Copyright b. Property, plant, and equipment 3. Supplies c. Intangible assets 4. Unearned service revenue d. Current lia

> What is the relationship between the accounting cycle and the worksheet?

> List the seven steps in the accounting cycle in the order in which they occur and explain what occurs at each step of the accounting cycle.

> Why are only the balance sheet accounts permanent?

> Identify each of the following categories of accounts as temporary or permanent: assets, liabilities, equity, revenues, expenses, dividends. How is the distinction between temporary and permanent accounts related to the closing process?

> Describe the four steps in the closing process.

> What is the purpose of closing entries?

> On the basis of what you have learned about adjustments, why do you think that adjusting entries are made on the last day of the accounting period rather than at several times during the accounting period?

> Describe the effect on the financial statements when an adjustment is prepared that records (a) Unrecorded revenue and (b) Unrecorded expense.

> How is the amount for an interest expense (or interest revenue) adjustment determined?

> Which type of adjustment will? (a) Increase both assets and revenues, (b) Increase revenues and decrease liabilities, (c) Increase expenses and decrease assets, and (d) Increase both expenses and liabilities?

> Financial information for three independent cases is as follows: a. The liabilities of Dent Company are $82,000, and its stockholders’ equity is $120,000. What is the amount of Dent’s total assets? b. The total assets of Wayne Inc. are $55,000, and its s

> What is the difference between an accrual and a deferral?

> For each of the four categories of adjusting entries, describe the business activity that produces circumstances requiring adjustment.

> Describe the recording of transactions that begin and end at a particular point in time and the recording of continuous transactions.

> What accounting concepts require that adjusting entries be employed?

> Why are adjusting entries needed?

> Provide two examples of transactions that begin and end at a particular point in time and two examples of continuous transactions.

> What happens during the accounting cycle?

> Explain when revenue may be recognized and give an example.

> The following information describes transactions for Morgenstern Advertising Company during July: a. On July 5, Morgenstern purchased and received $24,300 of supplies on credit from Drexel Supply Inc. During July, Morgenstern paid $20,500 cash to Drexel

> Heartstrings Gift Shoppe sells an assortment of gifts for any occasion. During October, Heartstrings started a Gift-of-the-Month program. Under the terms of this program, beginning in the month of the sale, Heartstrings would select and deliver a random

> Marni Restaurant Company engaged in the following transactions during March, its first month of operations. a. Received $100,000 cash from the sale of stock. b. Purchased $20,000 of inventory from J&J Wholesale Company. c. Purchased $30,000 of kitchen eq

> Refer to the information for Sparrow Company. Required: Prepare a classified balance sheet for Sparrow at December 31, 2019. Use the following information for Cornerstone Exercises 3-24 through 3-27: Sparrow Company had the following adjusted trial

> Refer to the information for Sparrow Company. Required: Prepare a retained earnings statement for Sparrow for 2019. Use the following information for Cornerstone Exercises 3-24 through 3-27: Sparrow Company had the following adjusted trial balance a

> Refer to the information for Sparrow Company. Required: Prepare a single-step income statement for Sparrow for 2019. Use the following information for Cornerstone Exercises 3-24 through 3-27: Sparrow Company had the following adjusted trial balance

> When adjusting entries were made at the end of the year, the accountant for Parker Company did not make the following adjustments. a. Wages of $2,900 had been earned by employees but were unpaid. b. $3,750 of performance obligations had been satisfied bu

> LaGarde Company has a machine that it purchased for $125,000 on January 1. Annual depreciation on the machine is estimated to be $14,500. Required: 1. Prepare the adjusting entry needed at the end of the year. 2. What is the book value of themachine rep

> Pain-Free Dental Group Inc. purchased dental supplies of $18,200 during the year. At the end of the year, a physical count of supplies showed $4,125 of supplies on hand. Required: 1. Prepare the adjusting entry needed at the end of the year. 2. What is

> Best Company had the following items that require adjustment at year end. a. Cash for equipment rental in the amount of $3,800 was paid in advance. The $3,800 was debited to prepaid rent when paid. At year end, $2,950 of the prepaid rent had expired. b.

> Olney Cleaning Company had the following items that require adjustment at year end. a. For one cleaning contract, $14,520 cash was received in advance. The cash was credited to Unearned Service Revenue upon receipt. At year end, $1,210 of the service rev

> Manning Manufacturing Inc. had the following items that require adjustment at year end. a. Salaries of $5,320 that were earned in December are unrecorded and unpaid. b. Used $1,970 of utilities in December, which are unrecorded and unpaid. c. Interest of

> Powers Rental Service had the following items that require adjustment at year end. a. Earned $9,880 of revenue from the rental of equipment for which the customer had not yet paid. b. Interest of $650 on a note receivable has been earned but not yet rece

> Listed below are the forms of business organization and several related advantages or disadvantages. Form of Business Advantage or Disadvantage Organization 1. Sole proprietorship a. Most complex to organize 2. Partnership b. Owner(s) have p

> Singleton Inc. uses the accrual basis of accounting and had the following transactions during the year. a. Merchandise was sold to customers on credit. b. Purchased equipment to be used in the operation of its business. c. A 2-year insurance contract was

> Speedy Delivery Company provides next-day delivery across the southeastern United States. During May, Speedy incurred $132,600 in fuel costs. Speedy paid $95,450 of the fuel cost in May, with the remainder paid in June. In addition, Speedy paid $15,000 i

> McDonald Music sells used CDs for $4.00 each. During the month of April, McDonald sold 7,650 CDs for cash and 13,220 CDs on credit. McDonald’s cash collections in April included $30,600 for the CDs sold for cash, $12,800 for CDs sold on credit during the

> Refer to the information for Sparrow Company. Required: 1. Prepare the closing entries for Sparrow at December 31, 2019. 2. How does the closing process affect retained earnings? Use the following information for Cornerstone Exercises 3-24 through 3

> Below are the steps of the accounting cycle. Journalize transaction. Analyze transaction. Close the accounts. Prepare financial statements. Adjust the account. Post to the ledger. Prepare a trial balance. Required: List these steps of the accounting

> A classified balance sheet contains the following categories: Current assets Other assets Long-term investments Current liabilities Property, plant, and equipment Long-term liabilities Intangible assets Stockholders’ e

> Refer to the information presented in Brief Exercise 3-33 for Pelton Company. The balance in Retained Earnings of $12,200 represents the balance as of January 1, 2019. Required: Prepare a retained earnings statement for Pelton for 2019.

> The adjusted trial balance of Pelton Company at December 31, 2019, includes the following accounts: Wages Expense, $22,400; Service Revenue, $38,400; Rent Expense, $3,200; Dividends, $4,000; Retained Earnings, $12,200; and Prepaid Rent, $1,000. Required

> Tyndal Company had the following items that required adjustment at December 31, 2019. a. Purchased equipment for $40,000 on January 1, 2019. Tyndal estimates annual depreciation expense to be $3,100. b. Paid $2,400 for a 2-year insurance policy on July 1

> Nichols Company had the following items that required adjustment at December 31, 2019. a. Electricity used during December was estimated to be $320. This amount will be paid in January. b. Owed wages to employees of $3,250 that were earned in December bu

> Examine the following accounts. a. Prepaid Insurance b. Inventory c. Interest Payable d. Unearned Service Revenue e. Accumulated Depreciation Required: Identify and explain why each account may or may not require adjustment.

> Lauhl Corporation provides janitorial services to several office buildings. During April, Lauhl engaged in the following transactions: a. On April 1, Lauhl received $24,000 from Metro Corporation to provide cleaning services over the next 6 months. b. On

> The following are several transactions for Halpin Advertising Company. a. Purchased $1,000 of supplies. b. Sold $5,000 of advertising services, on account, to customers. c. Used $250 of supplies. d. Collected $3,000 from customers in payment of their acc

> At December 31, 2019, the ledger of Aulani Company includes the following accounts, all having normal balances: Sales Revenue, $59,000; Cost of Goods Sold, $31,000; Retained Earnings, $20,000; Interest Expense, $3,200; Dividends, $5,000; Wages Expense $8

> Mulberry Services sells electronic data processing services to firms too small to own their own computing equipment. Mulberry had the following accounts and account balances as of January 1, 2019: Accounts Payable........................................

> Sweetwater Temporary Clerical Help Service opened for business in June 2019. From the opening until the end of the year, Sweetwater engaged in the activities described below. So that a realistic trial balance can be prepared, the events described below a

> Findlay Testing Inc. provides water testing and maintenance services for owners of hot tubs and swimming pools. During September the following transactions occurred: Sept. 1 Issued common stock for $20,000. 2 Purchased chemical supplies for $1,880 cash.

> Monilast Chemicals engaged in the following transactions during December 2019: Dec. 2 Paid rent on office furniture, $1,200. 3 Borrowed $25,000 on a 9-month, 8% note. 7 Provided services on credit, $42,600. 10 Purchased supplies on credit, $2,850. 13 C

> A list of accounts for Montgomery Inc. appears below. Accounts Payable Accounts Receivable Bonds Payable Building Cash Common Stock Copyright Cost of Goods Sold Depreciation Expense Income Taxes Expense Income Taxes Payable Insurance Expense Interest Exp

> The following T-accounts summarize the operations of Brilliant Minds Inc., a tutoring service, for April 2019. ' 1. Assuming that only one transaction occurred on each day (beginning on April 3) and that no dividends were paid, describe the transaction t

> Parker Company has a balance of $35,000 in retained earnings on January 1. During the year, Parker reported revenues of $82,000 and expenses of $55,000. Parker also paid a dividend of $8,000. Required: What is the amount of retained earnings on December

> Why is there a demand for accounting information? Name five groups that create demand for accounting information about businesses, and describe how each group uses accounting information.

> Several years ago, Mary Emerson founded Emerson Consulting Inc., a consulting business specializing in financial planning for young professionals. The following captions and amounts summarize Emerson Consulting’s balance sheet at Decemb

> The following list contains events that occurred during January 2019 at the local Ford dealer, Malcom Motors: a. California Central University (CCU) signed a contract to purchase a fleet of Ford Crown Victoria vehicles from Malcom Motors at a total price

> The accountant for Boatsman Products Inc. received the following information: a. Boatsman sent its customers a new price list. Prices were increased an average of 3% on all items. b. Boatsman accepted an offer of $150,000 for land that it had purchased 2

> Western Sound Studios records and masters audio tapes of popular artists in live concerts. The performers use the tapes to prepare ‘‘live’’ albums, CDs, and MP3s. The following account balances were available at the beginning of 2019: Accounts Payable..

> Karleen’s Catering Service provides catered meals to individuals and businesses. Karleen’s purchases its food ready to serve from Mel’s Restaurant. In order to prepare a realistic trial balance, the events described below are aggregations of many individ

> Cincinnati Painting Service Inc. specializes in painting houses. During June, its first month of operations, Cincinnati Painting engaged in the following transactions: June 1 Issued common stock for $25,000. 3 Purchased painting supplies fr

> Monroe Company rents and sells electronic equipment. During September, Monroe engaged in the transactions described below. Sept. 5 Purchased a Chevrolet truck for $38,900 cash. 8 Purchased inventory for $4,200 on account. 10 Purc

> A list of accounts for Montgomery Inc. appears below. Accounts Payable Accounts Receivable Accumulated Depreciation Cash Common Stock Depreciation Expense Equipment Income Taxes Expense Interest Expense Land Notes Payable Prepaid Rent Retained Earnings S

> The following T-accounts summarize the operations of Chen Construction Company for July 2019. Required: 1. Assuming that only one transaction occurred on each day (beginning on July 2) and that no dividends were paid, describe the transactions that most

> Luis Madero, after working for several years with a large public accounting firm, decided to open his own accounting service. The business is operated as a corporation under the name Madero Accounting Services. The following captions and amounts summariz

> An analysis of the transactions of Canary Cola Inc. yields the following information: service revenue, $78,000; supplies expense, $33,200; rent expense, $20,500; and dividends, $7,000. Required: What is the amount of net income reported by Canary Cola?

> A trial balance: a. lists only revenue and expense accounts. b. lists all accounts and their balances. c. will help detect omitted journal entries. d. detects all errors that could be made during the journalizing or posting steps of the accounting cycle.

> Posting: a. involves transferring the information in journal entries to the general ledger. b. is an optional step in the accounting cycle. c. is performed after a trial balance is prepared. d. involves transferring information to the trial balance.

> Which of the following statements are true? I. A journal provides a chronological record of a transaction. II. A journal entry contains the complete effect of a transaction. III. The first step in preparing a journal entry involves analyzing the transact

> Debits will: a. increase assets, expenses, and dividends. b. decrease liabilities, revenues, and dividends. c. increase assets, liabilities, revenues, expenses, and dividends. d. decrease assets, liabilities, revenues, expenses, and dividends.

> Which of the following statements are true? I. Debits represent decreases, and credits represent increases. II. Debits must always equal credits. III. Assets have normal debit balances while liabilities and stockholders’ equity have normal credit balance

> Which of the following statements is false? a. The left side of a T-account is called the credit side. b. All T-accounts have both a debit and a credit side. c. Transactions are frequently analyzed using a T-account. d. The amount in an account at any ti

> The effects of paying salaries for the current period are to: a. increase assets and increase stockholders’ equity. b. increase assets and increase liabilities. c. decrease assets and decrease liabilities. d. decrease assets and decrease stockholders’ eq

> The effects of purchasing inventory on credit are to: a. increase assets and increase liabilities. b. increase assets and increase stockholders’ equity. c. decrease assets and decrease stockholders’ equity. d. decrease assets and decrease liabilities.

> Taylor Company recently purchased a piece of equipment for $2,000 which will be paid within 30 days after delivery. At what point would the event be recorded in Taylor’s accounting system? a. When Taylor signs the agreement with the seller b. When Taylor

> Which principle requires that expenses be recorded and reported in the same period as the revenue that it helped generate? a. Historical cost b. Revenue recognition c. Conservatism d. Expense recognition

> An analysis of the transactions of Cavernous Homes Inc. yields the following totals at December 31, 2019: cash, $3,200; accounts receivable, $4,500; notes payable, $5,000; supplies, $8,100; common stock, $7,000; and retained earnings, $3,800. Required:

> Which of the following is not an assumption that underlies accounting? a. Historical cost b. Economic entity c. Time-period d. Going-concern

> Relevant information possesses this quality: Freedom from Error Predictive Value a. Yes Yes b. No Yes c. Yes No d. No No

> Information that provides feedback about prior expectations is: Relevant Faithfully Represented a. Yes Yes b. No Yes c. Yes No d. No No

> Which of the following is not a characteristic of useful information? a. Comparability b. Relevance c. Faithful representation d. Conservatism

> Which of the following is not a benefit derived from the conceptual framework? a. Supports the objective of providing information useful for making business and economic decisions. b. Provides a logical structure to aid in the understanding of complex ac

> Presented below are the four assumptions and four principles used in measuring and reporting accounting information. Assumptions Principles a. Economic entity e. Historical cost b. Going-concern f. Revenue recognition c. Time-period g. Expense r

> The following accounts and account balances are available for Badger Auto Parts at December 31, 2019: Accounts Payable $ 8,500 Income Taxes Payable $ 3,600 Accounts Receivable 40,800 Interest Expense 6,650 Accumulated Depreciation 47,300 I

> Rosenthal Decorating Inc. is a commercial painting and decorating contractor that began operations in January 2019. The following transactions occurred during the year: a. On January 15, Rosenthal sold 500 shares of its common stock to WilliamHensley for

> Pasta House Inc. was organized in January 2019. During the year, the transactions below occurred: a. On January 14, Pasta House sold Martin Halter, the firm’s founder and sole owner, 10,000 shares of its common stock for $8 per share. b. On the same day,

> Remington Communications has been providing cellular phone service for several years. During November and December, the following transactions occurred: Nov. 2 Remington received $2,400 for November phone service from Enrico Company. 6 Remington purchas

> Balance Sheet listed below are items that may appear on a balance sheet. Item Classification 1. Accounts payable........................................ a. Current assets 2. Machinery................................................... b. Property,

> Kauai Adventures rents and sells surfboards, snorkeling, and scuba equipment. During March, Kauai engaged in the following transactions: March 2 Received $51,500 cash from customers for rental. 3 Purchased on credit ten new surfboards (which Kauai class

> Jefferson Framers engaged in the following transactions: a. Purchased land for $35,200 cash. b. Purchased equipment for $16,400 in exchange for a 1-year, 8% note payable. c. Purchased office supplies on credit for $1,500 from Office Depot. d. Paid the $1

> Lincoln Corporation was involved in the following transactions during the current year: a. Lincoln borrowed cash from the local bank on a note payable. b. Lincoln purchased operating assets on credit. c. Lincoln paid dividends in cash. d. Lincoln purchas

> The following accounts are available for Haubstadt Shoe Works: Accounts Payable Accounts Receivable Accumulated Depreciation (Equipment) Advertising Expense Cash Common Stock Cost of Goods Sold Depreciation Expense (Equipment) Equipment Interest Expense

> Each of the balance sheet changes below is associated with a particular transaction: a. Equipment increases by $5,000 and cash decreases by $5,000. b. Cash increases by $4,100 and stockholders’ equity increases by $4,100. c. Supplies increases by $400 an

> During December, Cynthiana Refrigeration Service engaged in the following transactions: a. On December 3, Cynthiana sold a 1-year service contract to Cub Foods for $12,000 cash. b. On December 10, Cynthiana repaired equipment of the A&W Root Beer Dri